Nvidia (NASDAQ:NVDA) is one of the last major players to report its latest quarterly results, with the chip giant slated to release its fiscal third-quarter earnings on November 20.
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Nvidia’s climb to its position amongst the world’s most valuable companies has been built on the strength of its quarterly readouts. But interestingly, Goldman Sachs’ Toshiya Hari, an analyst ranked amongst the top 1% of Street stock experts, says the stock is trading “well below its past 3-year median P/E multiple” relative to his broader coverage universe. As such, the 5-star analyst thinks the stock is “set up well to sustain its outperformance.”
That outperformance has delivered returns exceeding 200% over the past year, but according to Hari, the true ‘break out’ quarter is still to come. That will only be in the April quarter (FY1Q), however, when the “ramp of Blackwell coupled with improved supply-side conditions drives meaningful positive EPS revisions.”
As for the upcoming October quarter (FY3Q) results, those won’t be bad, either, with Hari anticipating the F4Q guide and commentary will support his “constructive thesis on the stock.”
That positive thesis is based on the fact compute demand remains robust. Some of the company’s biggest clients – Alphabet, Microsoft and Amazon – reported earnings last week and while the pace of cloud revenue growth was different at each one, all three indicated that supply, rather than demand, “remains a constraining factor.” Microsoft, for instance, mentioned that they expect Azure revenue growth to pick up again in the second half of FY25 (the March and June quarters) as additional capacity becomes available.
Feedback from Nvidia’s partners and competitors also highlights a strong underlying market for AI infrastructure. AMD, for example, raised its forecast for the total addressable market (TAM) for AI accelerators from $400 billion by 2027 to $500 billion by 2028.
Hari says that the “most frequent pushback” to his positive investment thesis is that slow AI adoption (or ROI) could reduce AI infrastructure spending, thereby impacting Nvidia’s revenue and earnings. “While we subscribe to the view that Nvidia will ultimately experience a cyclical correction when customers enter a phase of compute capacity digestion and/or optimization,” he went on to say, “we believe the likelihood of this happening in the near-term (i.e. 6-12 months) is limited, particularly given the recent increase in the breadth of AI use cases.”
Bottom line, Hari rates NVDA shares a Buy, backed by a $150 price target. (To watch Hari’s track record, click here)
The average Street price target is slightly higher, at $153.86. Overall, based on 39 Buy ratings and just 3 Holds, Nvidia is rated a Strong Buy by the analyst consensus. (See Nvidia stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
